What are the effects of supply and demand shocks on sectors in the US during the period of COVID-19?

Details

Supervisors

Houssa, Romain

Faculty

Faculté des sciences économiques, sociales, politiques et de communication

Degree label

Master [120] en sciences économiques, orientation générale, à finalité spécialisée

Abstract

This paper seeks to understand the effects of supply and demand shocks on sectors within the U. S economy from 2014 to 2024, especially during the COVID-19 pandemic. We analyze the effects of the shocks on two categories of sectors/industries: the manufacturing sectors and the non-manufacturing sectors. The research employs a Structural Vector Autoregression (SVAR) model and uses zero/contemporaneous restrictions to identify the shocks. The study reveals that fluctuations in manufacturing output (IP) new orders and suppliers’ delivery time were generally more affected by demand shocks. As for non-manufacturing sectors, supply played a more significant role in the fluctuations of business activity, new orders and suppliers’ delivery time. At the beginning of 2020 (COVID-19 outbreak), our results show that economic fluctuations in both groups of sectors are mostly driven by supply shocks. Lastly, the effects of the shocks seem to die quicker for non-manufacturing sectors than for manufacturing sectors. This result suggests that manufacturing sectors are more vulnerable to shocks compared to their non-manufacturing counterparts in the U.S.